Is new construction going extinct?

The words "housing crisis" has been all over the news and on everyone's lips for several years, but don't write off the construction business in the United States just yet. True, the building industry -- especially the residential construction side -- seemed to be on life support as the deep recession reached its fourth anniversary in December 2011. But as 2012 got underway, there were increasing signs of recovery, however slow and painful it might be.

It's easy to see why people might be ready to write off new construction. The news toward the end of 2011 sounded bleak. It was widely reported that the figures for new single-family home construction in the U.S. were the worst since records had been kept. Sales of new single-family homes were lower than they had been since at least 1963, and spending on new construction overall was at a 12-year low [source: Greene]. Late in the year, the McGraw-Hill Construction Dodge Outlook Report predicted that the construction industry, which was at a low, would remain more or less flat through 2012 [source: McGraw-Hill Construction].

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How low can things go? National Association of Home Builders figures showed that starts of new single-family homes had plummeted from a high of 1,716,000 when the housing boom was in full swing in 2005 to a low of 429,000 in 2011 [source: Melman].

But by late February 2012, analysts were noting some more hopeful signs. Reports from various sectors of the construction industry, from concrete makers to architects, were cautiously optimistic. Stock prices from construction-related businesses such as Home Depot stores moved up, reflecting an increased belief that the long-delayed recovery in the housing market is beginning [source: Schaefer].

To understand why the housing recovery might finally be starting, it helps to understand why things got so bad. Keep reading for a look back.